Key Takeaways from BEA’s Latest FDI Data

October 22, 2019

Kimberly Aagard is a Research Analyst at SelectUSA

With the latest update of the Bureau of Economic Analysis (BEA) foreign direct investment (FDI) data recently released, the Investment Research team at SelectUSA couldn’t resist an opportunity to delve into the numbers and to follow up from our colleague’s previous post.

In 2018, the inward position of FDI in the United States totaled $4.3 trillion, which was an increase of eight percent from 2017. [Note: This statistic measures investment from the foreign ultimate beneficial owners (UBOs) that drive the decision to invest in the United States.] Over the past five years, the compound annual growth rate of the inward FDI position in the United States has been a strong 9.8 percent.

The largest six markets by UBO maintained their 2017 rankings of FDI position into the United States in 2018: in order, the United Kingdom ($597.2 billion), Canada ($588.4 billion), Japan ($488.7 billion), Germany ($474.5 billion), Ireland ($385.3 billion), and France ($326.4 billion). Together, these markets were the ultimate point of origin for more than 65 percent of all FDI in the United States – almost $2.9 trillion!

Many of the markets that are the largest sources of FDI into the United States also have FDI positions that are growing quickly. Belgium, Bermuda, Canada, China, Ireland, and South Korea are among both the top 15 largest and the top 15 fastest-growing sources of FDI in the United States by position. In addition, Argentina, the fastest-growing market for FDI in the United States in 2018, had a compound annual growth rate from 2013 to 2018 of 57.9 percent! [Note: The metric for the fastest-growing sources of FDI ranks only markets with 2018 FDI stock in the United States valued at least $1 billion.]

Source: SelectUSA calculations based on FDI data from the Bureau of Economic Analysis. www.bea.gov Accessed October 2019.

While the United Nations Conference on Trade and Development (UNCTAD) found that global FDI flows continued to decline from 2017 to 2018, the United States retained its dominant position as the top destination worldwide for FDI in 2018. Annual flows can fluctuate from year to year; however, FDI flows (which are measured by foreign parent instead of UBO) into the United States still totaled more than $250 billion in 2018.

When examining the FDI position in the United States by industry of the U.S. affiliate, the share of the position of each industry remained largely similar from 2017 to 2018. The manufacturing sector continued to make up the largest share, at almost 41 percent of the total FDI position in the United States in 2018. However, retail trade had the largest year-over-year growth in its position among industries from 2017 to 2018 (67.2 percent), followed by the real estate and rental and leasing sector (42.4 percent).

In 2018, manufacturing also made up the largest industry sector of FDI coming to the United States from almost all regions of the world: Europe, Asia and Pacific, Canada, Latin America, and the Middle East. The only region where manufacturing was not the largest sector of FDI was Africa, for which data on manufacturing FDI was suppressed.